Startups must work smart and hard

Strategy is a dirty word in early-stage companies. It’s easier to over-plan than under-plan. Over-planning leads to inaction, which is antithetical to startup growth. However, working smart is important. No matter how loose your plan is, it needs to be correct enough to push you in a direction that will lead to results. Startups are resource-poor and idea-rich. When you can only work on 10% of the things you know you need to do, prioritisation is crucial, and even the simplest act of prioritisation, no matter how intuition-driven it is, is an act of strategy.

Working smart is not enough, though. Startups need to work smart and work hard. This is why startups fail: they require unbelievable perseverance. It is excruciating to create product-market fit. It’s even more painful to build a repeatable growth model. And no matter how hard you work, if you make bad decisions, you will fail anyway.

Every startup is under constant threat of being strangled in the cradle by incumbents. By now, large companies are aware of the constant threat of disruption by startups. All great tech companies won by overcoming their Goliaths. So, they themselves look for budding success stories and kill them with impunity.

Established players have massive advantages over startups. “What’s stopping Google, Microsoft, or Apple from doing this?” — virtually every VC-backed founder has answered this question innumerable times. It’s a fair enough question:

• Incumbents have privileged access to customers, vendors, and partners. While they still need to go through the painful process of finding product-market fit, it’s much easier for them to build a repeatable growth model.
• Entrenched network effects grant them difficult-to-penetrate moats.
• Large companies can afford, and already employ, the best talent in all relevant fields.
• Large companies can tolerate a degree of failure, allowing them to invest in many seemingly unrelated bets.
• Big Tech and corporate tech companies have massive teams that they can throw at a problem, winning through sheer brute force.

Startups can almost never compete on any of these fronts, so to win, they must lean into their unique strengths — strengths that massive companies cannot replicate.

Large companies don’t typically work very hard. They win through parallelised effort. The combined effort of a massive workforce of smart, but only moderately engaged employees¹, accumulates into massive output. Startups are the opposite. In many early-stage startups, a single engineer accounts for 25–50% of the total output of the company. It is incredibly important for this person to be engaged and work very, very hard.

The unique advantages of small companies are:

• Nimbleness. It is easy to change directions when new learnings emerge.
• Dedication. It’s easier for employees to dedicate themselves to a cause shared by a small group than to a top-down strategy from corporate management.
• Low communication overheads. Every new employee exponentially increases the number of relationships and conversations involved in getting anything done. Small teams can easily broadcast decisions and focus on execution.
• Limited baggage. Nothing should be sacred in any startup. If a change in direction requires a painful pivot that will bruise egos or break existing business models, great startups forge ahead regardless. Corporations are restricted by path dependency.
• Risk appetite. Startups can break rules fearlessly, with little concern for public relations, internal pushback, or contractual conflict.

To win, startups need to lean into each of these advantages because they’re a decade away from the kinds of moats enjoyed by established corporations². This means they need to work smart (i.e., mostly do the right things) and work hard (i.e., execute at a pace and with intense risk tolerance). Remember: Goliath wins 99% of the time.

Footnotes